Quick answer
A business cash line is a limit you can draw on whenever a gap opens and repay when customers pay, after which the limit is available again. You are typically charged only on what you use. It suits shortfalls that keep coming back, such as GST months, pay weeks and slow-paying customers, and unsecured limits commonly sit between $5,000 and $500,000.
Key points
- Draw, repay, draw again, up to your limit.
- Cost follows what you use, not the full limit.
- Ideal for gaps that return on a rhythm.
- Set it up before you are desperate.
- Typical limit
- $5k – $500k unsecured
- How used
- Draw and repay repeatedly
- Charged on
- Typically what you use
- Best for
- Recurring gaps
Some gaps are one-offs. Others turn up like clockwork: the week GST is due, the fortnight after a big pay run, the stretch while a council or developer takes its time to pay. If your cash shortage has a rhythm, borrowing a fresh lump sum each time is clumsy. A line of credit fits the rhythm better.
How a cash line works
You are approved for a limit, say $80,000. You don’t receive it all. It sits there, available. When a gap opens, you draw what you need, perhaps $22,000. When customers pay, you repay, and the full limit is available again.
Two things follow from that:
- You only use, and generally only pay for, what you draw. A quiet month with nothing drawn is a cheap month.
- You don’t reapply each time. A fresh gap is a phone call or an online request, not a new application.
Cash line or loan?
| Lump-sum loan | Cash line | |
|---|---|---|
| Best for | One defined purchase or gap | Gaps that keep returning |
| How funds arrive | All at once | When you draw |
| Repayment | Fixed schedule | As cash comes in |
| Reuse | New application | Automatically available |
| Cost follows | The whole sum | Typically what you draw |
If you could name the end date on the first day, take a loan. If you suspect you will be back in six weeks, take the line.
Gaps coming back like clockwork? Start the 60-second enquiry and we’ll look at a standby limit.
Where a line shines
- GST months. Draw for the return, repay as sales proceeds arrive. See the GST return crunch.
- Pay weeks. Cover wages when customer payments run behind.
- Slow-paying customers. Fund the wait on invoices that are in the post. See slow-paying invoices.
- Opportunities. Seize a supplier special without a separate application.
- Seasonal swings. Buy stock before the peak, repay after.
Using one well
A line is easy to misuse, because money feels abundant. Four habits keep it healthy:
- Know why you are drawing. Match each draw to a known repayment source.
- Clear it regularly. If the balance never falls, you have turned a bridge into permanent debt.
- Keep a buffer. Don’t plan to use every dollar of the limit.
- Review it quarterly. Compare your usage with your forecast, using the cash gap guide.
What lenders check
Much the same things as for a loan:
- deposits and their steadiness
- account conduct: overdrawn days, dishonours
- existing repayments and advances
- the purpose and how cash returns
- the owner’s position, including guarantees
Because a line is open-ended, lenders like to see disciplined trading. The best time to arrange one is when the business is healthy, not when it is in a squeeze.
What to ask before you sign
- What is the limit and can it be reviewed or reduced?
- What does it cost in dollars when I draw $10,000 for a month?
- Are there facility or line fees even when unused?
- How quickly can I draw, and how do I repay?
- Is there a cleanup period when the balance must reach zero?
Fees, reviews and housekeeping
Lines come with housekeeping that loans do not. Limits are usually reviewed from time to time, and a lender may reduce or withdraw one if trading weakens, so do not treat the headroom as certain. Ask whether there is a facility fee, whether unused balances cost anything, and how quickly a draw is paid out. Keep a record of each draw with the reason and the invoice or bill it supports, so repayment is tied to an event. If the balance only grows, step back and consider whether the underlying problem is profit rather than timing.
An illustrative example
Illustrative only. A commercial cleaning company in Palmerston North invoices clients monthly but pays wages weekly. Each month the account dips for about two weeks. Rather than repeating short loans, the owner arranges a $70k line. She draws about $30k at the start of each month, repays it when invoices are settled, and pays only for those weeks of use.
Starting a conversation
If you suspect a standby facility would calm your cash flow, tell us about the pattern. The enquiry takes about a minute, asking does not involve a credit check, and your details go to one team. A real person works through the options with you.
Honest numbers on takings, timing and existing debts mean we can suggest a limit you will use sensibly.
Frequently asked questions
How is a cash line different from an overdraft?
A cash line is usually a separate facility with its own limit and terms, so your everyday account stays tidy. An overdraft sits on the transaction account and can be harder to control.
Do I pay for the whole limit?
Costs typically follow the amount drawn, but fees can apply to the facility itself. Ask for a breakdown in dollars.
Can I repay and redraw as often as I like?
That is the point of the structure, though terms vary. Check how often limits are reviewed and whether anything must be cleared periodically.
Is a cash line harder to qualify for than a loan?
Lenders look at similar things, namely deposits, conduct and commitments. A line suits businesses with steady trading and a good account record.